Managerial Decision Making and Its Process

Managerial decision making process is not as easy as people probably think so. Managers need to analyze each and every aspect of business before reaching any decision. All the operations and the body of the organization depend on effective and logical decisions made by the management authorities. Typically, every individual who is unaware of the concept of managerial decision making and its process would like to know from starting to its present uses in today’s trends, i.e. globalization, entrepreneurship and e-business world, etc. There are a few basic questions such as what the decision and decision making is, that may clear the perception of the basic idea of decision making and eventually will lead to the concept of managerial decision making.

Decision

Mostly, a decision is known as a specific choice from a range of present alternatives to solve any particular issue or meet certain challenges.

Decision Making

Decision making is termed as the process of finding or identifying any certain problem/opportunity in order to resolve them professionally through legal and logical ways. Besides, it can be said that making a decision is the preparation for practical actions.

Concept of Managerial Decision Making in Management

In the field of management, decision-making is known as a cognitive process, which results in a collection of a set of actions from current multiple alternatives. At some point, decision –making is the process which is performed by every individual in daily life; nobody can deny it. Regarding businesses, decision-making is a regular process or simply a habit.

Managerial Decision Making is one of the most critical processes in every organization. Successful and effective decision making gives profitable outcomes, whereas unsuccessful decision making causes a great loss. The use of several tools and techniques is possible in the entire process, as the management team has to choose one beneficial decision from a range of many. Besides, several perceptions can also help to identify and solve any issue. Additionally, a few managers also like to make decisions on their own or give priority to a collective decision.

As decision-making is a hard process, so sometimes, it involves dissatisfaction of another party. For preventing all the major conflicts and hurdles in decision-making, managers should follow the professional process of making managerial decisions. The following is the entire process of managerial decision making.

Managerial Decision Making Process

The decision making process involves the following 8 main and important steps. Each step may cover different techniques and tools. The main steps are: purpose identification, gathering information, alternatives judgment principles, analyzing the choices and brainstorming, alternatives evaluation, pick the best alternative, decision executions and results evaluation.

Purpose Identification

In the problem purpose identification steps, the problem is analyzed entirely in order to find its basic symptoms and possible loss. When it comes to identifying the problem, the following questions can provide enough help.

What is the problem?

Why it should be solved?

What parties are affected by it?

Any specific period or deadline of the problem?

Asking theses questions to oneself will eventually find the problem, its impact, affected parties, and future possible losses.

Gathering Information

The main target of the problem can either be one of the shareholders or all of them. While on the other hand, it may involve many factors that are affected by it. In order to have a complete look at the problem, the information should be gathered thoroughly, which relates to the involved shareholders or factors. Techniques and tools like “Check Sheets” can help a lot in the step of gathering information and it can be used effectively and efficiently.

Alternatives Judgment Principles

The ultimate focus of this step is to set baseline criteria for the alternatives in order to judge them appropriately. Regarding criteria, the corporate culture and goals of the organization should be considered also. For example, the profit is the only one and the most needed factor of every organization and is also an important factor that should be considered while decision-making. Nothing should be done that may cause the decrement of the profit, unless there is an exceptional case that cannot be resolved without sacrificing a little profit. Aside from it, baseline criteria should comprise entire relation to the problem

Brainstorming and Analyzing the Choices

Brainstorming refers to listing down all the ideas and ways to solve the problem. At very first, it is necessary to understand the possible causes of the problem and classifying them in the priority order such as from the most to the least effective cause. Cause-and-Effect diagrams & Pareto Chart tool can provide the needed help in this step. Cause-and-Effect diagram will help the management team to identify the certain causes of the problem, whereas Pareto Chart will perform its role in classifying them from the highest effect and identifying the level of the causes. After that now further steps can be taken for generating all the possible alternatives of the problem.

Alternatives’ Evaluation

After performing logical and professional steps, the next is to use one’s own judgment based on decision-making skills and experience along with judgment power. Find out the pros and cons of every alternate and eventually evaluate them on such basis to find out the one which seem to be more effective than the rest. Comparing different alternative can also give efficient output.

Pick the Best Alternative

After following the above methodology from step 1 to 5, this step is very easy. Probably, one might have found the best alternative after comparing the pros and cons of different alternatives, yet the one should be 100% confident and sure to pick the best possible alternative.

Execute the Decision

The second last step in the process of Decision Making is to give a practical shape to the decision by converting it into a plan, which contains a sequence of actions to be performed. It can be done alone or with the help of the management team.

Results Evaluation

Now that every step is performed and the decision is converted into a plan, eventually there is need of evaluating the outcome of the decision which will help the team of managers to learn from the problem and prepare precautions for the future time. Besides, it is the best practice to improve managerial decision making.